Title: Investor sentiment and global economic conditions
Authors: Miguel Herculano - University of Freiburg (Germany) [presenting]
Abstract: Investor sentiment is measured at both global and local levels as the common component of pricing errors investors make when valuing stocks. Investor sentiment and macroeconomic factors are jointly modelled within a hierarchical dynamic factor model allowing for time-varying parameters and stochastic volatility. We extend existing methods to enable estimation of the model with the prescribed hierarchy which permits cross-country analysis. The approach allows us to control for macroeconomic conditions that may contaminate investor sentiment indices. We find that global investor sentiment is a key driving force behind domestic sentiment and global economic conditions.